SHELTERING GOVERNMENT SUPPORT TO ‘GREEN’ ELECTRICITY: THE EUROPEAN UNION AND THE WORLD TRADE ORGANIZATION

Abstract

AbstractSince theCanada – Renewable Energy (2013)dispute at the World Trade Organization (WTO), the WTO Agreement on Subsidies and Countervailing Measures (SCM) has been the focal point of academic debate on the trade-environment interface, with a growing consensus that WTO subsidy rules need to be revisited with a view to securing ‘policy space’ for government support for renewable energy. This article explores whether, as suggested by some scholars, the European Union (EU)’s system of justifications for renewable energy aid could serve as a source of inspiration for the WTO. While this proposition may appear attractive at first sight, it is hardly conceivable, or even desirable, that the EU's approach to sheltering government support for renewable energy could be transposed to the WTO. This is because the two systems of subsidy control are fundamentally different in both substantive and procedural terms and, importantly, these differences reflect distinct objectives and political/institutional contexts. Nonetheless, this comparative analysis sheds light on where the key challenges lie for the WTO in ensuring that international trade rules and climate change mitigation objectives are mutually supportive. It is argued that the case for reviewing the SCM Agreement cannot be made by simply forging parallels with the EU's regulatory model, but needs to be carefully construed on the basis of a proper understanding of whether and how green policy space is actually constrained under the current WTO subsidy and trade remedy rules. However, this requires better information on existing WTO members’ practice in relation to renewable energy subsidies, as well as on their environmental effectiveness and possible trade-distortive impact. In this sense, the most valuable lesson that the WTO can draw from the EU's regulatory experience is the imperative of improving the transparency and knowledge-enhancing elements of its subsidy control system.